Politics on the brain at Caci…

August 28, 2008

Between the Democratic convention in Denver this past week and next week’s Republican version in the Twin Cities, it’s hard to escape politics. That’s even true in the SEC filings, judging by the 10-K that Caci International (CAI) filed yesterday. No matter which side you’re on, there’s no arguing that someone other than George W. Bush will be sitting in the Oval Office come Jan. 20, 2009.

Caci, for those who don’t remember, has been a major beneficiary of the current Administration. Over the past five years, Caci’s revenues have doubled to $2.4 billion, in large part because of the wars in Iraq and Afghanistan. Just shy of 75% of that — $1.8 billion last year — comes from the Department of Defense, which represents a 30% increase over last year. And, the company has attracted a fair amount of negative publicity over Abu Ghraib, a subject that’s mentioned repeatedly in the nearly 100-page filing.

So perhaps it’s understandable that Caci is a bit nervous about the current political situation here in the U.S., which it addresses in the boring-sounding “industry trends” section of the filing. Here’s Caci in their own words:

  • Increased Congressional oversight—Oversight at the Congressional level and audit scrutiny at the agency level is increasing due to a number of factors, including the existence of high profile cases involving alleged and proven contract abuses and an increased use of contractors to provide governmental support services. These factors introduce delays in procurement and contract awards.
  • Contract award protests—We continue to experience a high number of protests of contracts and task orders awarded to us, especially those involving large multiple award, IDIQ contracts. In some cases it may be deemed more prudent and beneficial to award more contracts than to go through the longer and more arduous process of justifying the initial award. This process causes delays in getting contracts and task orders awarded, affecting our revenue.
  • Election year dynamics—With presidential and Congressional elections being held later this calendar year, it is likely that there will be political appointees, as well as others closely aligned to the current administration, who will be leaving government early as their potential job prospects in a new administration will likely diminish. Vacancies in key positions can have the impact of slowing the decision process around procurements and contract awards.

While only the discussion of contract awards is new this year, the language was tweaked a bit on the other two items. In last year’s 10-K, for example, Caci bemoaned the changing guard in Congress “in what was formerly a Republican controlled Congress”. That language is gone in the current filing. Perhaps it’s a sign that Caci will have to learn to play nicely with the Dems in the future. After all, Caci’s revenues are largely dependent on the whims of Congress and the person sitting in the Oval O come January.

Image source: AP Photo by Manuel Balce Ceneta

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